Home flipping is a multi-stage process and while most flippers feel that their work is done once all of the rehab work is complete on the property, in some respects, the real work is just beginning. Even if you do everything right where the work is concerned, you don’t have a successful and profitable deal until you’ve sold the property. Selling for maximum value requires a combination of listing at the right price and accepting the right Denver home offer – and there are times when the best offer may not necessarily be the one with the highest price. Before you accept any Denver home offer, be sure to take the five following items into consideration.
Financing
One of the first things you need to consider is how the Denver home offer will be financed. There have been numerous changes in the loan approval process, many of which are aimed at protecting the consumer and ensuring they get the best deal possible. A byproduct of these changes is that there are often several days added to the closing process because there is a sequence that most loans need to follow before the next one can be started. Right now, the average loan time is around 45 days, which in and of itself does not necessarily create a problem. However, with all of the changes there are more 11th hour issues in the process than ever before, which means increased risk to you – even if the buyer has a pre-qualification letter. Accepting an offer from a financed buyer is never as certain as a cash offer, so you have to determine whether accepting a higher offer at increased risk is worth taking than a lower cash offer.
Timeframe
When you are selling a rehab, when you close is almost as important as how much you close for. Always look for the projected closing date on the contract. With a cash offer, you should be able to close within seven to 10 days, and any cash offer that comes with a longer timeframe should be greeted with skepticism. You want a lender financed offer to close within 30 to 45 days. Even clean offers often require at least one extension, and at this point you may be two months away from the time the initial offer was accepted. The market can change significantly in two months, and if the deal ends up not closing for any reason, it could cost you thousands. In general, the quicker you flip a home the quicker you can move to your next property.
Contingencies
Almost every Denver home offer comes with some sort of contingencies, the two most common being inspection and financing. The first thing you want to find out is how far out these contingencies are. Inspections should be a maximum of five days after the offer was accepted because you want to know where the buyer stands as soon as possible. You also want the loan approval date to be quick because financing contingencies delay closing. There are other contingencies to look for as well. For instance, you will want to be sure that there are no repairs or replacements the buyer is asking for. These will not only cost you money, but the delay closing as well. Additionally, if the buyer is haggling on the initial offer, this will likely continue throughout the entire process.
Deposit and Proof of Funds
The type of things that must accompany an offer depend on the type of financing involved; you will either want to look for a proof of funds letter or an increased down payment amount. A cash offer that comes in without a proof of funds isn’t worth anything because you need to verify that your buyer has the funds in an existing account. The letter or statement needs to be current and must cover the entire amount of funds needed at closing. Typically, in financed offers, the larger the down payment, the stronger the buyer is and just like a cash offer, you will need to see proof of these funds. Your buyer should deposit their down payment in addition to any other necessary funds into their escrow account. Buyers that fail to include this in the initial Denver home offer should be treated as a red flag that there is trouble producing the funds.
Signed Disclosures and Forms
When a buyer and a real estate agent that really want a property will send all of the necessary forms and paperwork signed and dated in one shot. If something is missing, it’s important to get it as quickly as possible. With modern technology, it is easier than ever to get signatures, and a buyer that makes you wait even one or two days may be the wrong buyer for you.
Price is one of the most important aspects in every offer, but it isn’t the only thing that you need to consider. A deal that doesn’t close will cost you thousands and your flip will end up being unsuccessful. Weigh the price with the ease of transaction and decide on the situation and Denver home offer that works best for you.